Wednesday, Apr 7, 2010, 4:21 pm

Chicago’s Widespread Wage Theft Epidemic

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$7.3 million stolen from workers each week in city and its county alone, new study says

By David Moberg

When he found out what his boss had done to him, Bill Van Dusen says he felt "violated." At the same time, the boss violated something else–the law.

Over the past two years, as the owners of Duraco Products–a suburban Chicago maker of plastic garden products–let their company slide towards its current bankruptcy, they frequently failed to pay their workers their full wages, always with some excuse about banks or other problems. And unbeknown to Van Dusen and others, the company was pocketing paycheck deductions for health insurance or child support.

Van Dusen, a lean 61-year old programmer with wavy white hair, discovered the owners' fraud on deductions. He needed care for a medical problem earlier this year, realized he had no insurance, and quit the job, but he now owes $20,000 in medical bills. He's also out $33,000 in pay he never received, and having spent the college fund for his children on everyday bills while waiting for his back pay, he now will have to use his retirement savings for their college.

Van Dusen is an unusual victim of wage theft. He's better paid, better educated and working a job not typical of workers whose bosses robbed them of money legally owed to them. But wage theft itself is quite common, especially among lower-wage workers, as shown by a new study of the Chicago labor market prepared by Nik Theodore and others for the Center for Urban Economic Development at the University of Illinois at Chicago. It is, like reports on Los Angeles and New York, a by-product of a collaborative national study of wage theft.

Alicia Sanchez is a more typical victim of wage theft. An immigrant woman, she prepared food and cleaned up at a fast food Indian restaurant in Chicago. Her employer paid her in cash, with no wage receipt record, $300 a week for working six 12-hour days each week–less than $4.20 an hour for a non-tipped job. That's well below the minimum wage and did not provide legally mandated overtime. For five months, she worked under these grueling conditions, until a friend brought her to a worker center that had helped–Arise Chicago, an affiliate of Interfaith Worker Justice.

"After I found out about my rights, I decided to quit," she says. She discussed doing something collectively, but her co-workers were afraid of losing their jobs or getting in trouble with immigration authorities. So she's pursuing a complaint under state and federal law that Arise helped her file to get back wages and overtime, after a delegation of supporters and Sanchez to the restaurant owner failed to resolve her problems.

Actually, she's filing two complaints. The second stems from her next job, a short stint as a cleaner for a small janitorial firm owned by an immigrant businessman that was "even worse," she says, than the restaurant job. In violation of his promise to pay every two weeks, her building maintenance employer paid only monthly in cash (with no deduction for social security). He paid a flat $500 a month, and the hours worked ranged from 110 to more than 220, a wage of as little as $2.30 an hour and never near the minimum wage. Now she's unemployed but an enthusiastic supporter of Arise.

Theodore's survey shows how pervasively employers steal money from their already low-wage workers. Nearly half experienced at least one, often multiple, wage thefts in the previous week. For example, one fourth of the population they surveyed was paid less than the minimum wage, a dollar or more less in three-fifths of those cases. One-fourth of their surveyed workers put in more than 40 hours in the previous week, but two-thirds of them received no compensatory time-and-a-half overtime pay. There were similarly widespread violations of laws on unpaid "off-the clock" work, meal breaks, provision of pay stubs and other workplace practices.

Wage theft cost the average worker 16 percent of her earnings, $50 out of $322 in weekly earnings, or about $2,595 a year lost annually out of $16,753. In Chicago and suburban Cook County alone that adds up to $7.3 million each week in wage thefts, a heist big enough for tabloid headlines.

And employers routinely illegally threaten workers who try to unionize or protest. (One-fourth tried in the previous year, but 35 percent of those were threatened or fired.)

Violations generally, but not universally, vary with characteristics of both the work and the workers. Abuses are more typical in certain industries (especially private household work, personal and repair work, retail and drug stores, social assistance and education), specific occupations (child-care workers, personal and repair servicers, building service workers, retail workers), and worker characteristics. Wage theft is more common against foreign-born workers, and–among native born–against African-Americans, against women, older workers, and less educated workers. Small businesses and employers who pay cash or flat weekly rates also more typically cheat their workers, though big corporations like Wal-Mart do as well.

But as the report indicates, "all workers are at risk" of both wage theft itself and the depressive effects of theft from others on labor market standards and on consumer buying power.

While Theodore notes that some employers even in the most violation-ridden industries follow the law, lawbreaking "has become standard business practice in so many industries." That puts the relatively good, or at least better, employers at a disadvantage.

It has become standard because enforcement has been spotty at best and the penalties minuscule. Now there are signs of change at both the state level (where the Illinois legislature, for example, is moving towards tighter enforcement and higher penalties) and federal (where Labor Secretary Hilda Solis has increased inspectors and launched a public-awareness campaign).

Reform is needed even more in this crummy job market, but it has always been morally necessary. "Something is wrong with the system where a worker who steals a hamburger from a gas station, he goes to jail," says Chicago Workers' Collaborative executive director Leone Jose Bicchieri, "but when rich people steal a lot from their workers, it's called embezzling or something else, and maybe years later they pay a small fine."

David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy. He can be reached at [email protected]